Archive for the ‘Pick of the Posts’ Category

How much is enough spending for the Pentagon? By various measures, the United States has outspent the next nine, 14, or 21 countries combined. What is perhaps more telling is that most of those other countries are staunch US allies.

* International Institute for Strategic Studies
** Stockholm International Peace Research Institute
*** PPP = Purchasing Power Parity, a measure that facilitates international budget comparisons by adjusting exchange rates to reflect the relative domestic buying power of national currencies.

Notes: The IISS column presents officially reported spending in USD at 2010 exchange rates, with two exceptions: China and Russia. For these, the number is an estimate of actual spending. The second column is SIPRI’s estimate of actual expenditures, also shown in USD at 2010 exchange rates. The PPP column converts estimates of actual expenditures into approximate purchasing power, mostly drawn from SIPRI data. For China and Russia, it also shows an IISS estimate of purchasing power, thus producing a range. Purchasing power calculations improve on estimates that use exchange rates alone. However, PPP ratios are based on comparisons between national economies as a whole, not the defense sectors specifically. This can overstate military purchasing power when a nation’s military sector is much more advanced than its economy overall or when a nation depends heavily on international arms purchases.

Comments: The biggest spenders of concern to the United States are Russia and China, although neither are considered US adversaries today.
• America and its top spending allies outpace these two countries taken together by margins exceeding three-to-one.
• America alone spent more than twice as much as these two countries in 2010, by some measures. By other measures, it outspent them combined by nearly four-to-one.
The review draws on data compiled by the International Institute for Strategic Studies (IISS) in London and the Stockholm International Peace Research Institute (SIPRI), both regarded as world leaders in the field of defense assessment.

Neither IISS nor SIPRI accept Chinese or Russian official defense budget numbers at face value. Their estimates seek to capture unreported military expenditure from other parts of the Chinese and Russian economy. Both also offer alternative estimates that aim to correct for exchange rate distortions when comparing nations at very different levels of economic development – although these corrections may somewhat over state the “purchasing power” of military budgets.

Differences in the IISS and SIPRI methods, and the difference between corrected and uncorrected exchange rate estimates, account for the range given in number of countries whose combined budgets equal that of the United States. The answer ranges from nine to 21 countries — and all but a few of these are US allies.

After years of touting the necessity of guns over butter, the defense establishment has changed its tune. With the official US unemployment rate stuck at over 8 percent, Pentagon flaks are now boldly declaring that “guns are butter.” The Department of Defense as a social program? It’s a cynical ploy as William Hartung and Stephen Miles point out in this article.

Here are the Pros and Cons on the story:
• A National Association of Manufacturers study released last week says Pentagon cuts will mean substantial jobs loss in the defense sector.
• At the same time, cutting defense spending may be among the least painful ways to trim the Federal deficit. This two minute video by Chris Hellman of the National Priorities Project explains why. His data is from a study by the Political Economy Research Institute at UMass.
• A $1 billion cut from the education sector will result in more than twice as many jobs lost as a $1 billion cut from the defense sector.
• We could cut $50 billion from the defense budget next year, put $25 billion to deficit reduction and put $25 billion into education and have a net increase of more than 20,000 jobs. That’s a win-win fiscal deal.

Now that speculation and discussion of a possible attack from Israel on Iranian nuclear development facilities is rampant, it is time to bring back a review I did on the eve of the U.S. invasion of Iraq:

…despite the repeated use of the term “preemption” to describe their counterproliferation strategy (see the 2002 National Security Strategy), the Bush administration’s strategic approach to Iraq is one of preventive war. The U.S. Department of Defense defines preventive war as “war initiated in the belief that military conflict, while not imminent, is inevitable, and that to delay would involve greater risk” while it defines preemptive attack as “an attack initiated on the basis of incontrovertible evidence that an enemy attack is imminent.” Preventive war has long been understood to be highly destabilizing and it is nearly impossible to reconcile it with the notions of non-aggression imbedded in the United Nations Charter.

Comparing the President’s requested budget authority for the Pentagon “base budget” in two successive budgets (FY-2012 and FY-2013) shows a reduction of nearly $490 billion in the years of comparison 2012-2021. This is a subtraction from last year’s plan and not from the CBO baseline, however.

There are other ways to measure progress in bringing fiscal responsibility to defense budgeting:

— Taking the 2012 spending level and holding it steady over the period 2012-2021 with increases for inflation only would produce a cumulative total of $5.82 trillion.

— Taking the 2011 spending level and holding it steady with increases for inflation would produce for 2012-2021 a cumulative spending total of $5.9 trillion.

Either of these might be used as alternative yardsticks for measuring the administration’s austerity efforts in the defense field — and both suggest a more modest rollback: $170 billion over ten years and $250 billion, respectively.

The future-years Pentagon base budget plan released by Secretary Panetta on 26 January 2012 foresees rolling spending back to the level of 2008, corrected for inflation. Spending on the non-war part of the budget during the next five years (2013-2017) will be about 4% lower than during the past five (2008-2012) in real terms. The real (that is, “inflation corrected”) change from 2012 will be a reduction of 3.2%

The chart below corrects for inflation by rendering all sums in 2012 dollars. It shows that base-budget spending had jumped 55% after inflation between 1998 and 2010. The new budget plan sets 2013 spending at $525 billion, which is 46% above the 1998 level.

The new budget plan – represented by the green trend line — stands in stark contrast to the reductions mandated by the Budget Control Act under the provisions for sequestration (represented by the red trend line). Sequestration would roll Pentagon base-budget spending back to the level of 2004, which would still be 31% above the 1998 level (corrected for inflation). The new budget plan and sequestration do have one thing in common: both would keep Pentagon spending above the inflation-adjusted average for the Cold War years (represented by the horizontal dash line).

The roll back in spending plans and the actual cuts to the budget are sufficient to engage every office and program in the Pentagon. That makes for a contentious debate as well as a load of fodder for partisan politics. It will help if we can keep things in perspective. The cuts we face today are far less dramatic than those following the Cold War. Aggregate budget authority during 1991-1996 was nearly 20% lower in real terms than during 1987-1990 – a decline five times greater than what the administration today proposes. Given our nation’s current economic straights, Pentagon advocates should actually breathe a sigh of relief.

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